Growth in the current period is a function of growth in the previous period. Audience growth is exponential, and many of the world’s most powerful businesses experienced rapid exponential audience growth in their infancy. Technology allows new ideas to spread faster than ever before. And because the developed world is wired, exponential growth can proceed for a long time before ever starting to level off.
If you find investments that might benefit from exponential growth, the worst that can happen is that they fail and you lose your initial investments. The best that can happen is that they succeed and you make 10 times or 100 times your investment—or, in the case of a Google or Facebook, a nearly infinite multiple of your initial investment.
In a world of exponential growth, if you bet too small relative to the theoretical optimal amount, you’re making a very small mistake. You still make a lot of money if things go well and you get on the right side of exponential growth; you just don’t make quite as much money as you would have if you had bet more. And by betting “too small,” you have a lower chance of going broke.
By contrast, betting too big relative to the optimal amount brings the catastrophic outcome of going broke into play. And when you’re broke, you can no longer benefit financially from long-term exponential growth. Betting too big relative to the optimal amount gets you very little in a world of exponential growth. Your overly large investments mean you make more in the event things go well, but you were already going to make a lot. In the event things don’t go well, overly large bets can easily bust you.